Despite the uncertainty surrounding the future of Wall Street’s jumpy stock market, the Thursday IPO of Israeli company AudioCodes on the US stock exchange passed successfully. The flotation was managed by Oppenheimer, Piper Jaffray, and Warburg Dillon Read and the Yahud company raised $49 million.
At the close of the first day’s trading, the share had risen 22% to $17.1, and the company levelled out at a value of $300 million, compared to $240 million (after money) at which it was issued. According to company sources, if the market were calmer, the share might have doubled its value.
The company’s shareholders, presumably, are happy with the outcome. The issuance prospectus indicates that their share-holdings have been upgraded by an aggregate value of $200 million, even though this consists, of course, of an unrealised capital gain,.
The company’s largest shareholder is DSP Group, manufacturer of DSP chips for the conversion of analog signals into digital. Post-issuance, this company holds 23.7% of AudioCodes shares, at a total current value of $68.5 million. DSP group chairman is Dr. Yigal Kochavi, who served as senior manager of the Dovrat Shrem group and the Clal Electronics Industries concern. A "Globes" report published on Thursday, prior to the issuance, mistakenly attributed the DSP group-owned package of shares to Kochavi.
The largest private shareholders are the two founders, Leon Bialik and Shabtai Adlersberg. Adlersberg, the company general manager who was also a member of the founding core of DSP group, in which he served as Vice President, holds a package valued at $60 million.
Bialik, who holds an identical package, serves as technological manager and vice-president of AudioCodes.
Other shareholders are the Polaris Fund of the Dovrat Shrem group managed by Hami Peres, which holds shares worth $16.5 million, and Genesis Partners, an Oppenheimer group venture capital fund managed by Eyal Kishon, who formerly held various positions in Dovrat Shrem, IBM, AT&T, and Eddie Shalev, who represents the US investment bank. The Genesis fund holds a package worth $20 million.
Another shareholder is Chase Securities investment company, with a smaller share package of $3.5 million.
AudioCodes develops software and hardware designed for overcoming obstacles that arise where there is a need to transmit voice and facsimile messages over data communications and Internet networks, such as delay and loss of data packages. Its products includes software and chips for converting analog into digital signals (DSP), communications cards and communications software. In other words, AudioCodes equipment enables customers to transmit voice on data communications networks, on the basis of Internet protocol.
The company’s customers are manufacturers of equipment for telecommunications and communications companies such as Lucent (which acquired Ascend), Alcatel, Cisco, the RAD group, VocalTec and Clairnet. Inter alia, the company enables its customers to build equipment which will dovetail with the efforts of the leading telephony companies to build a communications network on the basis of Internet protocol, with the quality of regular telephony.
AudioCodes has a great deal of expertise in voice compression. This is a technology that reduces the bandwidth taken up by a voice signal by compressing and narrowing it, while at the same time, maintaining reasonable sound quality.
The company’s performances are not less impressive than the success of its IPO. AudioCodes posted a net profit for the third quarter in succession, and impressive growth rates, and also posted, for Q1 1999, a net profit twice the amount recorded for the whole of 1998.
The company’s Q1 1999 sales climbed to $5.8 million compared to $43.6 million in the fourth quarter of 1998, up 60%. Net profit rose even more significantly, amounting, in the first quarter of 1999, to $1.6 million compared to $940 million in Q4 1998, a 70% advance.
Published by Israel's Business Arena May 30, 1999